A “carbon bubble” is being formed because of an overvaluation of oil, coal and gas reserves held by companies across the world, according to a report out on Friday.

Energy firms will be forced to leave two-thirds of these reserves underground if the world is to meet internationally-agreed climate change targets. As a result, these fossil fuels will be unburnable and therefore worthless - causing huge market losses.

The research has been conducted by Lord Stern, a professor at the London School of Economics, and think tank Carbon Tracker, which is supported by HSBC, Standard & Poor’s and the International Energy Agency, among others.

The Bank of England has also identified a collapse in the value of oil, gas and coal assets as nations tackle global warming a potential risk to economies.

London is at particular risk as the City is home to many major commodity companies.

Stern found that the top 200 firms spent $674bn (£441bn) - equivalent to 1pc of global GDP - last year to find new resources, which may not be harvested.

“The scale of ‘listed’ unburnable carbon revealed in this report is astonishing,” said Paul Spedding, an oil and gas analyst at HSBC.

“ This report makes it clear that ‘business as usual’ is not a viable option for the fossil fuel industry in the long term. [The market] is assuming it will get an early warning, but my worry is that things often happen suddenly in the oil and gas sector.”

Up to 60pc of the market capitalisation of oil and gas firms is at risk from the “carbon bubble”, HSBC concluded.

Governments have agreed to cap any rise in global temperatures to 2C, but Stern argued that investors “can’t believe that”.

Ratings agencies have also expressed concerns, with S&P stating that the risk could lead to oil companies being downgraded within the next few years.